On December 2, 2014, the United States Supreme Court heard oral argument in B&B Hardware, Inc. v. Hargis Industries, Inc.. The question before the Supreme Court is how much deference, if any, a federal district court hearing a trademark infringement suit should give to a “likelihood of confusion” finding by the Trademark Trial and Appeal Board (TTAB), an administrative body that decides proceedings concerning registration of trademarks. There is currently a split among the federal appellate courts concerning the impact of a TTAB finding of “likelihood of confusion” in subsequent trademark infringement litigation.
The case before the Supreme Court involves a heated trademark dispute that spans nearly 20 years. B&B Hardware (B&B) sells a fastener in the aerospace industry under the trademark “Sealtight,” while Hargis Industries (Hargis) sells self-drilling screws in the construction industry under the trademark “Sealtite.” B&B registered its “Sealtight” mark in 1993. Hargis later applied to register its “Sealtite” mark (which B&B opposed) and sought to cancel B&B’s registration. In 2007, the TTAB held that Hargis’ mark was not entitled to registration because there was a “likelihood of confusion” between Hargis’ mark and B&B’s registered mark. Hargis did not appeal the TTAB’s decision. B&B subsequently filed a trademark infringement action against Hargis, contending that the TTAB’s finding of “likelihood of confusion” precluded Hargis from re-litigating the issue in the district court. The district court disagreed, finding the TTAB’s finding of “likelihood of confusion” did not control the issue in the infringement action. At trial, the jury found in favor of Hargis, determining – contrary to the TTAB – that there was no “likelihood of confusion” between the parties’ marks.
The district court’s decision was upheld by a divided panel of the U.S. Court of Appeals for the Eighth Circuit. B&B Hardware, Inc. v. Hargis Inc., No. 10-1037 (8th Cir. 2013). Although the TTAB and district court proceedings both involved the question of “likelihood of confusion,” the Eighth Circuit held that the issue decided by the TTAB in the context of a trademark registration proceeding actually was not the same as the issue before the district court in the infringement action. In the Eighth Circuit’s view, the TTAB’s “likelihood of confusion” finding was based principally on the similar appearance and sound of the marks, which the TTAB had determined was stronger evidence of “likelihood of confusion” than the countervailing evidence that the fasteners offered for sale by the parties were different from one another and were marketed to different industries and customers. The Eighth Circuit reasoned that the standard employed by the TTAB very well might be appropriate for deciding questions of trademark registration, but it was not suitable for deciding “likelihood of confusion” in infringement cases because it failed to place sufficient emphasis on the critical issue of the marketplace usage of the marks and goods. Thus, since the TTAB had not decided the same “likelihood of confusion” issue that was presented in the infringement action, the Eighth Circuit held that the TTAB’s finding did not have preclusive effect in the district court. The dissent argued that the TTAB’s finding precluded re-litigation of “likelihood of confusion” in the subsequent infringement action. In the dissent’s view, the differences between the TTAB and Eighth Circuit standards for determining “likelihood of confusion” were merely modest differences in analytic approach to the same ultimate issue.
At oral argument before the Supreme Court there were no clear indications of the case's likely outcome. See Argument Analysis: Justices Unsettled in Trademark Preclusion Dispute. Justices Ruth Bader Ginsburg and Kagan expressed the view that TTAB proceedings are summary in nature and usually involve much lower stakes than infringement litigation, which could make it unfair for a TTAB finding of “likelihood of confusion” to preclude a thorough litigation of the issue in a subsequent infringement case. Other members of the Supreme Court appeared concerned whether all of the evidence that could be presented to the district court in infringement litigation, such as the marketplace context evidence that the Eighth Circuit found critical, could be presented to the TTAB in registration proceedings. A few questions from Justice Roberts hinted at a possible compromise decision that a TTAB finding could be preclusive in subsequent infringement litigation involving the same uses of goods or services considered in the TTAB, while no preclusive effect could be given in subsequent infringement litigation concerning uses different from those at issue before the TTAB.
If the Supreme Court ultimately decides that a TTAB finding of “likelihood of confusion” precludes re-litigation of the issue in a subsequent infringement action, it would clearly elevate the importance of TTAB proceedings for trademark law practitioners and their clients. It would incentivize parties to devote increased resources to TTAB proceedings that previously were viewed as involving relatively low stakes. As a result, TTAB proceedings could be expected to more closely resemble federal court litigation in both complexity and cost. According preclusive effect to TTAB findings would also likely increase the frequency of appeals of TTAB proceedings, especially appeals to federal district courts, where new evidence can be submitted and – as one appellate court recently held – the entire evidentiary record may be reviewed de novo. See Swatch S.A. v. Beehive Wholesale, LLC, No. 12-2126 (4th Cir. 2014).
The Supreme Court’s decision is expected later this spring.